The Pension Regulator (TPR) today welcomed the conclusions of the Bank of England System-Wide Exploratory Scenario (SWES) which demonstrates that pension funds have significantly improved their resilience with respect to Liability Driven Investment (LDI) over the past two years.
The SWES represents the first system-wide exploratory scenario exercise that includes Non-Bank Financial Institutions. TPR played a key role in analysing the results of the SWES particularly in relation to the impact on LDI and the collateralisation processes of such investments. TPR welcomes the next steps outlined in the report.
Nausicaa Delfas, Chief Executive of The Pensions Regulator said:
“This report shows that pension schemes are now more resilient to extreme market movements.
“We recognise the important role pensions play in the wider financial eco-system and continue to guard against systemic risks by understanding how schemes act during stressed market conditions, as well as exploring improvements to our data collection to make sure we keep savers safe.”
Notes to editors
- Read the Bank’s report.
- To support the Bank’s work, TPR leads an external risk panel, which includes asset managers, pension schemes and senior consultants in industry and TPR’s own financial risk team.
- In April 2023, TPR issued new guidance setting out further practical steps trustees should take to manage risks when using leveraged liability driven investments (LDI).
- Evidence from TPR’s own market engagement shows pension schemes are using TPR’s guidance to strengthen their on-going resilience.
- TPR is the regulator of work-based pension schemes in the UK. Its statutory objectives are to:
- protect members’ benefits
- reduce the risk of calls on the Pension Protection Fund (PPF)
- promote, and to improve understanding of, the good administration of work-based pension schemes
- maximise employer compliance with automatic enrolment duties
- minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only)
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